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SBPH: 2016 Results Sustaining Continued HBV/STING Development

By John Vandermosten, CFA


Spring Bank Announces FY:16 Results

Spring Bank Pharmaceuticals Inc. (NASDAQ:SBPH) filed its fiscal year 2016 10-K on February 15, 2017 in conjunction with a press release highlighting the company’s achievements over the period.  Full-year revenues of $352 thousand were as expected and represent National Institute of Health grants to support the development of SB 9200.  No grant revenue was received in the third or fourth quarter.

Operating expenses for the year were $19.4 million, divided between R&D at $14.0 million and G&A at $5.7 million.  This was an increase from the prior year’s expenses of $11.6 million due to a non-cash charge related to share transactions, higher clinical trial costs and greater public company and employee costs.  Interest income totaled $96 thousand, up from $32 thousand in the prior year, and other income was $1.9 million, due to the change in fair value of warrant liabilities.

Fourth quarter expenses were $4.4 million, slightly less than our estimate of $4.5 million.  R&D expenses were $2.8 million, matching our estimate and flat with 4Q:15 levels.  G&A expenses of $1.6 million were $0.1 million behind our estimate, but higher than the $1.3 million for the same period in 2015.

Cash and equivalents of $25.5 million rose sequentially from $12.8 million due to the November share issuance, providing sufficient capital to support the company’s development programs until third quarter 2018.

Recent Highlights

- On December 19, 2016, Spring Bank announced a collaboration between its SB9200 immunomodulator and Arbutus Biopharma’s (NASDAQ: ABUS) AB-423, a capsid inhibitor.  The collaboration will begin with preclinical combination work that will examine the mechanism of joining a capsid inhibitor and an immune modulator for HBV treatment.

- On October 6, 2016, Spring Bank announced a collaboration with Arrowhead Pharmaceuticals (NASDAQ: ARWR) to use Arrowhead’s AR-520, an RNAi gene silencer, and Spring Bank’s SB9200.  The ARC-520 compound uses a small interfering RNAs (siRNAs) upstream of the reverse transcription process to inhibit HBV cccDNA-derived mRNA and reduce the production of HBV viral proteins.  Regulatory agencies raised safety concerns regarding preclinical work in non-human primates employing Arrowhead’s proprietary “EX1” liver-targeted, intravenously administered delivery vehicle.  Due to these concerns Arrowhead halted all of the HBV-related clinical trials in early December 2016, however, the program may return if the safety concerns are addressed.

- Spring Bank’s collaboration with Gilead Sciences (NASDAQ: GILD) continues as the partner contributes Viread (tenofovir) to combination studies performed in the phased trials.  Gilead has recently launched an improved version of tenofovir which demonstrates ten times the efficacy of its precursor as well as improved renal and bone safety.  The new drug named Vemlidy is expected to replace the currently used Viread in the next stage of trials.

- Spring Bank raised $15 million in gross proceeds with the sale of 1.64 million shares of common stock and warrants in November 2016.  The securities were sold at a price of $9.12 per share and the warrants have a strike price of $10.79 and a five year duration.  The proceeds from the financing, along with the $15.6 million on the balance sheet as of the end of 3Q:16 are expected to provide sufficient funding to support the operations and development programs through 3Q:18.

- The company continues to enroll the first cohort of its Phase 2a dose finding study and expects to report top-line results by 2Q:17.  We remind investors that expectations for the initial dose of 25 mg are minimal given the objective of developing a dose response curve.  The second, third and fourth cohorts will double the dose of SB9200 each iteration to 50 mg, 100 mg and 200 mg respectively and are where we should expect to see the highest rate of response.

Anticipated Milestones

- 1H:17 - Report top-line results from first dosing cohort from SB 9200 Phase 2a ACHIEVE study

- 2H:17 - Preclinical proof-of principle results for SB 11285 in certain cancer in vivo models

- Late 2H:17 - Report top-line results from 50mg & 100mg monotherapy cohorts from Phase 2a ACHIEVE study in 2H 2017 & 1H 2018 respectively

- Mid-2018 - Report results from last monotherapy dosing cohort from Phase 2a ACHIEVE study

- Mid-2018 - Potential IND submission for SB 11285

- 2H:18 - Potential preclinical proof-of-principle results for SB 9200 / HBV antivirals fixed-dosed combination

- Initiate Phase 2b portion of ACHIEVE study (subject to 2a results & additional funding)

SB 11285 Development Program

Spring Bank first publicly announced its STING program in early September 2016 with a release noting that poster presentations would be made at AACR the following month.  On October 20, the company presented scientific data on its novel proprietary STING agonist program, as a potential immunotherapeutic agent for the treatment of selected cancers called SB 11285.  The data illustrated that the activation of the STING pathway can induce cellular interferons and cytokines and promote an aggressive and strong anti-tumor response.  The agent also stimulates multiple pattern recognition receptors and interferon stimulated genes.  SB 11285 has potent immune-modulating and anti-tumor activities and acts through recruiting T-cells, facilitating T-cell trafficking into tumors and facilitating cancer cell apoptosis within the metastasized tumor.

The SB 11285 program is still in the preclinical testing stage and we anticipate preclinical proof of principle results later this year.  Assuming the program remains on track and sufficient funding is obtained, we further anticipate an IND filing by second half 2018.

The exhibit below highlights the method of action for STING.  Spring Bank’s SB 11285 dinucleotide is able to turn on the STING pathway and signal interferon production.  In turn, T-cells are activated to recognize the antigens that are expressed on the tumor cells.  The T-cells then migrate to the tumor from the lymph nodes through the bloodstream.  When the the T-cells reach the cancer cells, they produce enzymes that induce lysis in the cancer cells and the tumor is essentially disolved.

Activation of STING and Interferon

Review of Spring Bank Thesis

As a reminder, we estimate a 2022 worldwide launch of SB 9200 either alone or with a global pharmaceutical partner.  SB 9200 is a small dinucleotide developed as a prodrug using the company’s small molecule nucleic acid hybrid (SMNH) platform technology.  The product is designed to activate specific intracellular sensor proteins including RIG-I, NOD 2 and STING which activate the body’s immune system to fight viral infections including hepatitis B (HBV).

The company’s lead product is in Phase 2a trials for chronic HBV.  SB 9200 is pan-viral and could be a future treatment option in addressing certain viral respiratory diseases, HIV latency, hepatitis D (HDV) and potentially other diseases caused by RNA viruses.  The compound functions by selectively modulating the antiviral signaling proteins, RIG-I and NOD2, in virally-infected cells. This selective immune-modulation has the capability to up-regulate the host immune response and potentially destroy the virally-infected cell.  Subject to additional funding, Spring Bank may pursue these indications.

SBPH also has a very exciting immuno-oncology drug in the pre-clinical phase that targets the STING (STimulator of INterferon Genes) protein.  Initial work performed by Spring Bank and others pursuing this pathway have engendered a lot of interest and investment given the promising early-stage preclinical data.

Below we summarize the key elements of our thesis:

- Positive public health environment for the development CHB functional cure

- Potential addressable market size of near 4 million patients in the U.S. and EU alone

- Lack of other effective immunomodulators available in the market

- Promising proof of concept data in important animal models for chronic HBV

- Well tolerated lead compound with no dose limiting toxicities and promising antiviral activity

- Proprietary technology platform that can be broadly applied in multiple therapeutic indications


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